What is the False Claims Act Alternative Ready
Provision?

When a relator brings a false
claims action in the name of the Government under the False
Claims Act ("FCA"), the Government may elect to pursue its
claim through any alternate remedy available to the Government,
including any administrative proceeding, to determine a civil money
penalty. If any such alternate remedy is pursued in another
proceeding, the person initiating the action shall have the same
rights in such proceeding as such person would have had if the
action had continued under the FCA. ((31 USC §3730(c)(5)).
Thus, the False Claims Act has an alternate remedy provision which
gives the relator the same rights in the alternate proceeding that
he or she would have had if the action had continued under the
FCA.

There is no identical "alternate remedy" section in the
SEC Whistleblower Statute or corresponding rules. Section
21F of the Securities Exchange Act of 1934 ("Exchange Act") (15
U.S.C. §78u-6), entitled "Securities Whistleblower Incentives and
Protection," requires the Securities and Exchange Commission (the
"Commission") to pay awards, subject to certain limitations and
conditions, to whistleblowers who provide the Commission with
original information about violations of the federal securities
laws. There is no provision for the Commission itself to
pursue the claims through an alternate means or to pass the claims
off to a different administrative agency or judicial body, and then
pay an award to the whistleblower on any monetary result achieved
by that agency or body.

SEC Whistleblower Relation Action

However, the
Whistleblower Rules do allow a whistleblower to receive an award
for a recovery in a "related action" - including actions
brought by the Department of Justice - IF the SEC itself brings an
action based on the whistleblower's submission and recovers more
than $1 million and the original information that the whistleblower
gave to the Commission is the same information that led to the
successful enforcement by the other entity in a "related
action."

A "related action" is a judicial or administrative
action that is brought by:

(i) The Attorney General of
the United States;

(ii) An appropriate regulatory
authority;

(iii) A self-regulatory
organization; or

(iv) A state attorney general in a
criminal case,

§ 240.21F-3(b).

The legislative history of the Whistleblower rules shows
that the regulators considered and specifically rejected allowing a
whistleblower to receive an award for a recovery in a related
action even in the absence of an action or recovery by the
Commission: "We have not modified the rule to permit a
whistleblower to recover in a related action absent a successful
Commission action, because the statute expressly requires a
successful Commission action before there can be a "related action"
upon which a whistleblower may recover."

Thus, if a whistleblower files a Form TCR with the SEC exposing
fraudulent conduct and also gives original information to a
judicial or administrative body such as the Department of Justice
that takes independent action to prosecute the fraud, he or she
will be entitled to receive an award on the result achieved by the
other body if SEC itself also brings an action based on the
whistleblower's same information and recovers more than $1 million.
Please read here about Immunity and Protection for
Whistleblowers.

Note that a whistleblower who first provides original
information regarding a fraud to an agency or body listed in §
240.21F-3(b) has 120 days from that date to submit the same
information to the Commission in order to be eligible for an award
based on any recovery achieved in an action by the
Commission. As 17 CFR 240.21F-4(7) makes clear:

If you provide information to
the Congress, any other authority of the Federal government, a
state Attorney General or securities regulatory authority, any
self-regulatory organization, or the Public Company Accounting
Oversight Board, or to an entity's internal whistleblower, legal,
or compliance procedures for reporting allegations of possible
violations of law, and you, within 120 days, submit the same
information to the Commission pursuant to § 240.21F-9 of this
chapter, as you must do in order for you to be eligible to be
considered for an award, then, for purposes of evaluating your
claim to an award under §§ 240.21F-10 and 240.21F-11 of this
chapter, the Commission will consider that you provided information
as of the date of your original disclosure, report or submission to
one of these other authorities or persons. You must establish the
effective date of any prior disclosure, report, or submission, to
the Commission's satisfaction. The Commission may seek assistance
and confirmation from the other authority or person in making this
determination.

SEC whistleblowers may report violations of federal securities
laws, violations of the rules of a self-regulatory organization
(such as FINRA) or violations of the
Foreign Corrupt Practices Act (which concerns allegations
related to bribery of foreign officials).

Contact Us To Learn More

If you have discovered evidence of government fraud,
contact an experienced False Claims Act attorney before blowing the
whistle. You may be entitled to a substantial reward and the legal
protections afforded to whistleblowers under state and federal
laws. The attorneys of Berger & Montague are nationally
recognized experts in Whistleblower/Qui Tam actions with over a
decade of experience pursuing these complex fraud cases. For more
information or to schedule your confidential consultation, use the
form on the right or call us at 1-800-424-6690.